RECENT ASPECTS CONCERNING SMEs FROM NORTH-EAST REGION OF ROMANIA

8/13/2019 RECENT ASPECTS CONCERNING SMEs FROM NORTH-EAST REGION OF ROMANIA

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Journal of Engineering Studies and Research – Volume 19 (2013) No. 4 7

RECENT ASPECTS CONCERNING SMEs FROM NORTH-EASTREGION OF ROMANIA

CATALIN DROB1, VALENTIN ZICHIL1

1“Vasile Alecsandri” University of Bacau, Calea Marasesti 157, Bacau, 600115, Romania

Abstract: The North-East (NE) region of Romania is, in terms of area, the largest of the 8

regions and is made up of 6 counties: Iasi, Bacau, Neamt, Suceava, Botosani and Vaslui. NE Region i s one of the poorest regions of Romania. The SMEs sector, considered to be

the engine of economic development, is rather poorly developed in this region. Thus, in this

area of the country we have the lowest density level of SMEs in Romania, the NE region

occupying the penultimate place in the economic performance standings, from differentregions of the country. The chance of economic recovery of the region is attracting andefficient use of government and community funds to develop the SMEs sector.

Keywords: SMEs, development, NE region

1. INTRODUCTION

The main objective of this paper is to deal with current problems of the SMEs sector in the North-East region of

Romania (one of the six regions of the country and, unfortunately, the poorest regions of Romania). The chance

of economic recovery of this region is to develop the SMEs sector.

Since 1989, there have been significant changes in the national economy. Thus, the former state socialist

enterprises were transformed into private companies, public or mixed. At the same time, appeared shy at first,

then more vigorously, new small private businesses that have reinvigorated the national economy and led to the

development of a true market economy. The legal framework for the operation of SMEs in Romania is provided by Law 133/1999 on stimulating private entrepreneurs for setting up and development of SMEs.

According to this law (which was subsequently supplemented and revised to be consistent with the EC

Recommendation no. 361/2003) in the small and medium category includes the following companies [1, 2]:- Micro enterprises with up to 9 employees and has an annual net turnover of up to 2 million;

- Small enterprises that have between 10 and 49 employees and has an annual net turnover of up to EUR 10

million;- Medium enterprises that have between 50 and 249 employees and has an annual net turnover of 50 million

euros.

Currently, the role of SMEs in the national and regional economy is very important because they contributes in a

large proportion to the achievement of the country's GDP and provides jobs for a large number of people.

Corresponding author, email: [email protected]

© 2013 Alma Mater Publishing House




2. SHORT PRESENTATION OF THE NORTH-EAST REGION OF ROMANIA

Development regions of Romania were established based on Law no. 315/2004 on regional development in

Romania [3]. Development Region NE is as surface, the largest of the 8 regions, having about 15.46 % of the

total area of the country. In terms of population, NE region is approximately 3.7 million people, representing

about 17 % of the total population of the country [4].

Most of the population from this region (over 56 %) lives in rural areas. Rural area of NE region is quite poor,

manifesting a big discrepancy in terms of quality of life between rural and urban areas. In rural areas there is ashortage of jobs, here practicing mainly subsistence agriculture. In this rural area there is a migration of many

young people either to urban areas in Romania or to other more developed countries. A secondary effect of thismigration is the aging of the rural population.

If between 60-70 years of last century there was a forced industrialization of NE region, after 1989 is found anopposite phenomenon (de-industrialization) which led to the closure of many industrial companies, for various

reasons such as lack of markets sales, poor management, outdated technology, labor productivity well below thenational and European average, different petty private interests. Only major cities of the region NE (Iasi, Bacau,

Piatra Neamt, Suceava) attracted important investments and investors leading to a widening gap between the

level of development of these cities and the development of small towns and villages of this region.

In recent years, at the level of the NE region, the unemployment rate has exceeded the national unemployment

rate (see Figure 1) [5]:

Fig. 1. The unemployment rate in Romania and at the level of the NE region.

Most unemployed people have between 40 and 49 years old. These people, once dismissed, hardly find a new job. In terms of unemployment, the situation is not good either for young people under 25 who, after completing

high school or university, cannot find a job easily. If we analyze the evolution of the total number of employeesworking in enterprises in NE region is observed in recent years (except in 2008) a reduction of this number (see

Table 1) [5]:

Table 1. The total number of employees working in enterprises in Romania and at the level of the NE region

[Thousands employees].

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Romania 4619 4568 4591 4469 4558 4667 4885 5046 4774 4376 4348

NE Region 636 599 594 563 566 564 579 592 557 499 490

At the end of 2011, in Romania most employees were operating in the service sector and trade (40.5 % at the

national level, respectively 34.4 % in the NE region of total employees). The share of people working in industryand the construction was in 2011, 36.5 % nationally, respectively 34.1 % in the NE region and the share from the

total number of those employed and working in the social services sector (administration government, education,health, social welfare etc.) was 20.9 % nationally, 28.5 % in the NE region, from the total employees [5, 6, 7].




NE region is considered one of the poorest regions of Romania. This is evident if we analyze the indicator calledGDP/capita (expressed in Euro). These values are well below the value at national level (Figure 2) [5, 6, 7].

Fig. 2. The values of the GDP/capita indicator in Romania and at the level of the NE region.

If we analyze this indicator in the counties of this region we see that there are large discrepancies. So if Iasi and

Bacau (with 5000, respective 4300 Euro/capita) recorded for this indicator values as close as the value recordednationally, Vaslui and Botosani ranks last two places in the ranking counties in terms of the GDP/capita.

3. RECENT ASPECTS CONCERNING SMEs FROM THE NORTH-EAST REGION OF ROMANIA

After 1990, in Romania, the SME sector began to emerge ever stronger, with few exceptions, from year to year.

Currently, the share of SMEs in total national and regional firms (99.7 %) is very close to the share of SMEs intotal enterprises in the EU (99.8 %) [8, 9]. The positive trend of the number of SMEs both at national and NE

region level was stopped by financial and economic crisis which occurred since 2009 (see Table 2) [5].

Table 2. The number of SMEs in Romania and at the level of the NE region

[Thousands of SMEs].

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Romania 319 325 356 403 431 460 500 533 518 469

NE Region 37 37 41 45 49 51 55 59 58 52

With the onset of the crisis, the economic and financial situation of SMEs both at national and at NE region levelworsened. Thus, in the NE region, the economic and financial crisis has had the effect of reducing business for

almost 43 % of all SMEs in the region. Just for 19 % of SMEs in NE region the last 3-4 years have been a periodof business development. Other SMEs in the region (38 % of total) were able to operate at the same parametersdespite the difficulties they faced.

The main problems faced lately SMEs in NE region were lower domestic demand, excessive taxation,

bureaucracy, high costs of business financing, corruption etc.

An important indicator of the development of the SMEs sector is the number of SMEs per 1000 inhabitants,

which reflects the density of SMEs. This indicator cannot be calculated accurately because in Romania there wasa strong process of population migration both within national borders (from rural to urban areas and a less

developed region to more developed regions) and abroad (population migration to more economically developedcountries) (see Figure 3) [5]:

Looking at this indicator it can be seen that the NE region has the lowest level of SME density of all Romanianregions. In another ranking, the economic performance of SMEs in different regions of the country, NE region

occupies the penultimate place as SMEs in this region contributes only 7.3 % to the turnover of SMEs inRomania [10]. All these issues highlight the fact that SMEs sector in NE region of Romania is still weak.

Therefore, it requires implementation of coherent strategies to support the SMEs sector in the region.




Fig. 3. The number of SMEs per 1000 inhabitants in Romania and at the level of the NE region.

National and regional level, the Agency for the Implementation of Programmes and Projects for SMEs ran and

still runs several national programs such as [11]: - The program for stimulating the setting-up and development of micro enterprises by young entrepreneurs;

- The multi-annual national program for establishment and development of technological and business

incubators;- The Multi-annual national program for development of an entrepreneurial culture among women managers

from the SMEs;- The START Program to develop entrepreneurial skills among young people and facilitating access to finance

etc.

At regional level SMEs development should be carried out in parallel with the development of an infrastructure

to create the optimum framework for the development of new business. Perhaps the most important support inthis sector is the European funds. Recently, a support for SMEs in developing national and regional is the

attraction and use of European funds in the sector. Thus, in 2007-2013, SMEs in Romania received financial

support of around 1 billion Euro in POSCCE, POSDRU or PNDR programs. This amount is very smallconsidering that for our country has been allocated in the 2007-2013 structural funds worth 19 billion Euros (of

which had been spent by the end of 2011 only 2.9 billion Euros in total economy).

4. CONCLUSIONS

NE region of Romania is one of the least developed regions of Romania and the EU. This underdevelopment isfound both in the regional economy in general and the SMEs sector in the region. NE region has the lowest level

of SMEs density of all regions and occupy the penultimate place in the economic performance rankings of SMEsin different regions of Romania. Moreover, in the NE region, the economic and financial crisis has reduced

activity for almost 43 % of all SMEs.

Given the regional and national realities we can say that the future of SMEs in Romania and the region willdepend very much on attracting and using government and community funds to develop this sector. Only

consistent and effective use of these funds can help reduce the gap between the development of the SMEs sector

in developed EU countries and the development of this sector in Romania, especially in the NE region.

5. REFERENCES

[1] Legea privind stimularea infiintarii si dezvoltarii IMM-urilor nr. 133/199.[2] Legea privind stimularea infiintarii si dezvoltarii IMM-urilor nr. 346/2004.

[3] Legea privind dezvoltarea regionalã în România nr. 315/2004.[4] www.adrnordest.ro/.

[5] http://www.insse.ro.




[6] Fundatia Post Privatizare: Raportul anual privind sectorul IMM din România, 2010 (Annual report regardingthe SME sector in Romania), http://www.postprivatizare.ro/romana/wpcontent/uploads/2011/02/ Raport_FPP_RO -13022011_web.pdf .

[7] Fundaia post-privatizare, Situaia curent a întreprinderilor mici i mijlocii din România, Ediia 2012,

http://www.postprivatizare.ro/romana/wp-content/uploads/2012/06/studiu-IMM_2012.pdf.

[8] European Commision, The Small Business Act Fact Sheet Romania (2010/2011),http://ec.europa.eu/enterprise/policies/sme/facts-figuresanalysis/ performance-review/files/countries sheets/2010

2011/romania_en.pdf.

[9] European Commission, Small Business Act Fact Sheet Romania 2012,http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/files/countries sheets/2012/

romania_en.pdf.[10] http://www.cnipmmr.ro/.

[11] www.aippimm.ro/.

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RECENT ASPECTS CONCERNING SMEs FROM NORTH-EAST REGION OF ROMANIA